Mr. Jason Redman reports

NEWSTRIKE BRANDS LTD. ANNOUNCES THIRD QUARTER 2018 RESULTS

Newstrike Brands Ltd. has achieved significant milestones and a strengthened financial position for the three and nine months ended Sept. 30, 2018. The company's wholly owned subsidiary, Up Cannabis Inc., is a licensed producer of cannabis and related products under the Access to Cannabis for Medical purposes Regulations (ACMPR). The company's interim financial statements and management's discussion and analysis for the three and nine months ended Sept. 30, 2018, and its amended and restated interim financial statements and management's discussion and analysis for the three and nine months ended Sept. 30, 2017, are available on SEDAR.

Third quarter ended Sept. 30, 2018, highlights:

• The company recognized its first ever sales of cannabis to the adult-use and wholesale markets in excess of $3.4-million.
• The company entered into a definitive supply agreement with the Alberta Gaming, Liquor & Cannabis Commission (AGLC) that is expected to result in a variety of Up Cannabis product sold through AGLC-approved strategic retail partners and locations, and through the AGLC.
• The company entered into a memorandum of understanding with the B.C. Liquor Distribution Branch (BCLDB) that is expected to result in a variety of Up Cannabis product sold through BCLDB approved strategic retail partners and locations.
• The company entered into a cannabis master agreement with the Ontario Cannabis Retail Corp.
• The company was selected by the Nova Scotia Liquor Corp. (NSLC) as one of 14 licensed producers which have received initial purchase orders for adult-use cannabis by the NSLC.
• The company was cleared as a supplier of cannabis to Saskatchewan retail and wholesale permit holders.
• The company closed its previously announced investment agreement with Inner Spirit Holdings Ltd. pursuant to which the company and Inner Spirit have agreed to acquire equity interests in each other and entered into a companion strategic alliance agreement, providing for the retail distribution of Up Cannabis products and the creation and operation of Up Cannabis-branded customer lounges or experiential hubs in each of the Inner Spirit stores.

                                   SELECTED SUMMARY OF QUARTERLY RESULTS
  
                                                               Q3 2018 QTD    Q3 2017 QTD    Q3 2018 YTD    Q3 2017 YTD

Revenue                                                         $3,420,446             $-     $3,420,446             $-
Inventory production costs expensed to cost of sales            (2,353,314)             -     (2,353,314)             -
Gross margin before the undernoted                               1,067,132              -      1,067,132              -
Fair value changes in biological assets included
in inventory sold                                               (1,056,084)             -     (1,056,084)             -
Unrealized (loss)/gain on change in fair value of
biological assets                                               (1,070,337)             -        925,040              -
Gross margin                                                    (1,059,289)             -        936,088              -
Expenses                                                        (7,450,780)    (3,828,411)   (24,155,723)    (5,639,310)
Other items                                                        359,722       (113,771)     9,530,079     (7,382,827)
Net (loss)                                                      (8,150,347)    (3,942,182)   (13,689,556)   (13,022,137)
Other comprehensive income                                       3,344,152              -      3,236,652              -
Net and comprehensive (loss)                                    (4,806,195)    (3,942,182)   (10,452,904)   (13,022,137)
Net (loss) per share (basic and diluted)                             (0.01)         (0.01)         (0.03)         (0.07)

During the quarter, the company generated revenue of $3,420,446. Revenue of $600,583 was from the company's first shipments of dried cannabis to the provincial government wholesale distributors in Alberta, Ontario and Nova Scotia as these customers began preparation for initial sales commencing Oct. 17, 2018. The company continues to fulfill orders received for the adult-use cannabis market and expects to receive additional orders pursuant to executed supply agreements. Revenue of $2,819,863 was from wholesale sales of cannabis for extraction purposes and the creation of cannabis oil and/or distillate.

For the three and nine months ended Sept. 30, 2018, $2,353,314 of costs incurred during the production process and capitalized to inventory was expensed. This resulted in gross margin of $1,067,132 (31.2 per cent of revenue) before the fair value adjustment on the sale of this inventory. The expense of $1,056,084 for the fair value changes in biological assets included in inventory sold represents the amount of non-cash fair value adjustment being realized upon the sale of finished goods inventory.

For the three and nine months ended Sept. 30, 2018, the company recognized a loss of $1,070,337 and a gain of $925,040, respectively, related to the fair value adjustments of biological assets, being the company's inventory of cannabis in the preharvest stage. The loss for the three months ended Sept. 30, 2018, was primarily due to the inefficiencies related to the start-up and ramp-up costs of producing cannabis in the Niagara facility, along with lower-than-expected yields in the initial batch of plants cultivated at this facility. Additionally, the yield realized for certain plants in the Brantford facility was lower than originally projected as equipment trialled failed to meet expected production targets. The gain for the nine months ended Sept. 30, 2018, was due to the production of cannabis, which is representative of nine months of production at the Brantford facility and approximately five months of production ramping up at the Niagara facility.

The company's major expenses incurred during the quarter relate to: branding and marketing efforts of $3,054,056; share-based compensation charges of $1,033,971; wages and benefits of $937,807; consulting and professional fees of $1,321,693; and other growth-related costs, including travel, telecommunications and information technology. The company's major expenses incurred during the year to date relate to: branding and marketing efforts of $6,320,516; share-based compensation charges of $8,228,820; wages and benefits of $3,328,255; consulting and professional fees of $3,526,411; and other growth-related costs, including travel, telecommunications and information technology.

Included in other items for the quarter is the loss of $250,000 due to a provision recorded on the holdback receivable on the divestiture of Enderlein and net interest income of $609,722. Year to date, other items included a net loss on the divestiture of Enderlein of $110,679, net interest income of $140,758 and the termination fee paid to the company related to the CanniMed Therapeutics Inc. transaction of $9.5-million.

Other comprehensive income is composed of the fair market value change recognized on strategic investments made in other Canadian cannabis businesses.

The company recorded a net loss of $8,150,347 and $13,689,556 for the quarter and year to date. The comprehensive loss was $4,806,195 in the quarter and $10,452,904 year to date.

Strong financial position

As at Sept. 30, 2018, the company had total assets of $162,771,457, including cash and cash equivalents of $107,642,357, up from total assets of $24,881,426, including cash and cash equivalents of $811,028, as at Dec. 31, 2017. The increase is due to the net proceeds from the two bought deal equity offerings, the receipt of the termination fee and the increase in fair market value of its strategic investments.

As at Sept. 30, 2018, the company's inventory of dried cannabis was $6,077,635, and the fair value of the biological assets was $2,011,369. It is expected that the biological assets will yield approximately 1,700 kilograms of cannabis.

Significant milestones achieved

The company has made its first historical sales of $3,420,446 during the quarter. Accumulated dried and finished good cannabis inventory was valued at $6,077,635 as at Sept. 30, 2018. The fulfilment and backlog of orders further demonstrate the company's ability to capitalize on increasing demand for its products.

The company has continued the construction and expansion of its Niagara facility, engaged in various marketing initiatives, and added experienced production and management personnel to build the company's Up Cannabis brand and consumer awareness.

The company currently operates cannabis production facilities of approximately 194,000 square feet of indoor and greenhouse production capacity, in the aggregate, of which approximately 7,600 square feet are currently operating at or near full production capacity at its Brantford facility and approximately 186,400 square feet at its Niagara facility that is currently being retrofitted. Management expects that the Niagara facility will produce approximately 15,000 kilograms of dried cannabis annually upon completion of the greenhouse retrofit. As at the date of this press release, the retrofit of the Niagara facility is expected to be completed by the end of the financial year, being Dec. 31, 2018, assuming there are no unexpected interruptions to the schedule of retrofit activities.

The construction of the company's second greenhouse for the phase 2 Niagara expansion is under way, and the steel structure is erected. The headhouse expansion has the foundation complete, structure erected and roof installed, and is progressing with windows and walls being installed. The phase 2 Niagara expansion includes 60,000 square feet of processing space and 160,000 square feet of additional greenhouse space dedicated to cannabis production. At full ramp-up, completion of the retrofit and construction of the new greenhouse and processing areas at the Niagara facility, which are currently in progress, and the continued operational efficacy of the Brantford facility, the complete potential aggregate annual production capacity for all facilities will be approximately 37,000 kg of dried cannabis. This estimate is subject to change based on realized plant yields experienced at the Niagara facility.

The amended statements

The amended statements have been amended to correct errors in the original interim financial statements and management's discussion and analysis. Certain line items in the statements of financial position, comprehensive loss, cash flows and changes in shareholders' equity have been reclassified according to the nature of the transactions. The net and comprehensive loss for the nine months ended Sept. 30, 2017, was increased by $422,082 due to a change to the listing fee for the reverse takeover transaction involving Newstrike and HpI Holdings Ltd., pursuant to which HpI amalgamated with 2559595 Ontario Inc., a wholly owned subsidiary of Newstrike, to form 1977121 Ontario Inc., resulting in the indirect acquisition by Newstrike of all of the issued and outstanding securities of HpI. The reserve in the condensed consolidated interim statement of changes in shareholder's equity was increased by $422,082 due to a change to the valuation of the warrants acquired through the transaction. Corresponding amendments were also made to the company's management's discussion and analysis.

Other matters

Further to the company's press release dated Sept. 11, 2018, announcing Newstrike's graduation from Tier 2 to Tier 1 issuer status on the TSX Venture Exchange, common shares previously deposited into escrow pursuant to the rules of the TSX-V will now be governed by the release provisions of Tier 1 issuer escrow. The company advises that 95,499,005 Newstrike common shares were released from escrow on Sept. 12, 2018, following completion of the uplisting, and 90,937,905 common shares remain in escrow and will be released on Dec. 1, 2018.

About Newstrike Brands Ltd.

Newstrike is the parent company of Up Cannabis, a licensed producer of cannabis that is licensed to both cultivate and sell cannabis in all acceptable forms. Newstrike, through Up Cannabis and together with select strategic partners, including Canada's iconic musicians The Tragically Hip, is developing a diverse network of high-quality cannabis brands.

We seek Safe Harbor.